Why Kingfisher Airlines is down under?

KFA

I recollect that day well. It was year 1990; Aviation sector was just thrown open to Private sector for the first time in India after ‘too long’ depending on inefficiency of Indian Airlines, the loss making national airline. I had chosen to fly by Damania Airways from Bombay to Goa. The flying time was only 30 minutes; but as soon as I got into the flight and before I could get settled on to my seat, I was greeted by young attractive charming flight attendant (obviously female) with rich nutritious chocolate candy, fresh fruit juice which I gladly accepted. Within next 5 minutes, I was offered a can of beer and snacks to go along with it. Naturally, I was dumb-founded since I was used to ‘No such hospitality’ having flown by Indian Airlines always in the past. I justified to myself – ‘Hey, great times are going to be here since Aviation sector got privatized in India!’ Such was the glamor to run the Airlines business ! Well, Damania Airways closed shop soon because I did not see it anymore after few years. Jet Airways remained there, obviously it had good backing financially ( owned by Mr Naresh Goyal, ex-employee of a airline agency who is billionaire now by Jet speed and no one gets to meet him as such so easily!).

Indian Politics and bureaucracy – have always got itself involved ‘too much’ with every growth ‘sun-shine’ sector. Whether it be Private Airlines, Software industry balloon ( no longer it is), infrastructure now, etc. Kingfisher Airlines is no exception to this. The Rs 7000 crore debt that KFA is embroiled into could have been avoided if proper check was exercised before each loan was extended by PSU banks. But then, Vijay Mallya of KFA is flamboyant businessman and does not ever compromise on quality; to the extent, he is a great Showman among industrialists. And he has the necessary political clout to be what he is. KFA has been rescued in the past too ! Its unpaid loans were converted into equity and bought over by stakeholders. So far, so good. But now the debt is around Rs 7000 crore ! Govt. of India has already a white elephant ‘Air India’ with Rs 67000 crore debt. So, How can it let go KFA under these circumstances? Hence, this talk/ debate over Govt. concessions to KFA !

In addition, Indian Airline industry suffers from from high taxes on fuel, rising world prices and a social obligation to serve uneconomical routes for eg., to North-East India. Yes, the seats go empty ! I have witnessed this myself. Of course, this cannot be the only reason for KFA’s mounting debt. Because Indigo Airlines is making profits. It is another thing that the ‘leg-room’ in Indigo is cramped, reclining seats do not recline at all (making you sit straight throughout the journey!). Well, Vijay Mallya did not want to operate like Indigo or low-cost carrier such as Air Asia etc. And the fundamental problem with Airline industry is the margins are getting thinner; to the extent it is only 3% now. How do they survive then?

The only solution is ‘opening up’ the Indian aviation sector further. Get FDI in to well-to-do airlines and put in more foreign players’ investment. Answer: Mergers & Acquisitions ? FDI will get better management practices in force ! Uneconomical routes can be addressed by feeder-airlines attached to major players. Concessions and benefits should be more to players plying on these uneconomical routes. Probably, TATA group would be still interested in KFA, despite its unsuccessful attempt to acquire 40% stake in Air India in the past. Government should stay off and be only a transparent enabler. All we need today is a pro-active enabler government. FDI will give us healthy competitive conditions in Aviation sector in India. This is clearly a ‘management case-study’ for revival of a good quality airline that is in deep red now. Why not auction it and let the moneyed bidder buy KFA or ask Vijay Mallya to put in more money into KFA that he has invested in cricket, formula 1 racing etc. Better management practice, successful leadership is required to revive this quality airline !!

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